Employee benefit plans are widely used today by both employees and employers to provide for an individual employee's retirement needs. Pursuant to these employee benefit plans, employees can establish financial accounts under the benefit plan. These financial accounts and the employee benefit plans are established and structured to comply with various tax and employment laws.
These benefit plans are administered by a plan administrator who works with the employer (the plan sponsor) to help establish and maintain the benefit plan. The plan administrator is a financial institution or a third party administrator that operates to administer the employee benefit plan. Among other responsibilities, the plan administrator will maintain detailed records showing all transactions in the individual accounts, and will, pursuant to the individual account holder instructions, cause transactions to be executed in the individual's financial account. In some cases the plan administrator may be part of a larger financial institution that includes a broker dealer, and in other cases the plan administrator will be a separate entity which will work with a broker dealer. A typical scenario would include a broker dealer establishing a trust account which holds all of the assets for a retirement plan, but the broker dealer typically does not maintain records for each of the individual accounts. The plan administrator would maintain records as for each of the individual accounts and would convey instructions to the broker dealer for specific transactions which are to be executed in the trust account. The plan administrator would maintain records of all the transactions for each of the individual accounts. Collectively, the combination of all the individual accounts would correspond to the holdings in the trust account held by the broker dealer.
Typically, benefit plans will be established to provide individual employees with a range of different investment options representing a broad spectrum of different possible asset classes. Frequently, these investment options include a variety of different mutual funds, and other fixed income investments, and money market funds. Company stock may also be an option for some plans.
Individual employees participating in these retirement plans can elect to have a certain percentage of their paycheck or a flat dollar amount deposited into their financial account established under the benefit plan. Frequently, the employer will also make contributions to the employee's financial account under the benefit plan. In connection with opening an account under the benefit plan the plan administrator will receive detailed personal information for the individual employee. This information can include the individual's age, date of hire, number of dependents, annual salary, job title/profession, home mailing address, social security number, e-mail address, and possibly a personal identification number (PIN). The plan administrator maintains a data storage system tracking all of the investments for each of the financial accounts under the benefit plan. The plan administrator also causes different transactions to be executed, such as the buying and selling of securities, pursuant to instructions from the individual employees.
In many instances the individuals will make their own decisions regarding the buying and selling of different securities. The plan administrator operates a computer system which can track all of the transactions and deposits, withdrawals and earnings for the individual financial accounts. Further, the individuals can generally choose to either increase or decrease the amount of their paycheck which they direct to their financial account.
On a periodic basis, which is generally quarterly, the plan administrator will issue an account statement to the individual employees who have individual financial accounts established pursuant to a benefit plan. These account statements typically include information about the financial account such as the value of the account at the beginning of the present calendar year, the value of the account at the time statement was prepared, the assets held in the account, and a description of all transactions in the account during the account period.
FIG. 1 shows an overview of the architecture of a system 100 for implementing account statements for a benefit plan under the prior art. This system includes a data storage system 110 for storing financial account information. The data storage system also includes information identifying the individual owner, or individual associated, with a financial account, and includes personal information for the individual. On a periodic basis typically quarterly a processor system 112 extracts data from the data storage system 110 and then uses this data to prepare an account statement. In some cases the processor system may include multiple processor systems and the plan administrator may outsource the preparation and delivery of the account statements. In such situation, the plan sponsor would provide account information to a third party and the third party would use a processor system to format and prepare the information so that the account statement could be prepared and delivered to the individual associated with the account. This account statement could be delivered to the individual by printing the account statement and sending it via mail 114, or the account statement could be formatted for transmission via e-mail 116, or the account statement could be formatted so that it could be made accessible to the individual over the web 118 using a personal computer with an internet browser. Numerous methods have been developed for using computer systems such as the Internet to securely deliver confidential information. For example, the following US patents and International patent applications, which are incorporated herein in their entirety by reference, provide discussion of details of delivering confidential information using the internet: U.S. Pat. Nos. 6,367,010 B1 (METHOD FOR GENERATING SECURE SYMMETRIC ENCRYPTION AND DECRYPTION); 6,014,688 (E-MAIL PROGRAM CAPABLE OF TRANSMITTING, OPENING AND PRESENTING A CONTAINER HAVING DIGITAL CONTENT USING EMBEDDED EXECUTABLE SOFTWARE); 6,304,897 B1 (METHOD OF PROCESSING AN E-MAIL MESSAGE THAT INCLUDES A REPRESENTATION OF AN ENVELOPE); and international patent applications: WO 98/49643; WO 01/03367; WO 99/34286; WO 00/46729; WO 01/78491.
The value of the account statement to the individual is that it gives the individual some idea of the past performance of the account, and lets the individual review recent transactions in the account. In the past these account statements have not provided individualized financial planning advice regarding steps that an individual could take to improve the performance of the account relative the individuals retirement needs.
In the past when an individual wanted to receive specific advice regarding financial planning for a retirement account, the individual could go to a number of different sources. Traditionally, an individual would enlist the services of a financial adviser. The financial advisor would review the individual's retirement needs and make recommendations for changes to be made in connection with a financial account.
In recent years a number of software tools have been made available to individuals, so that they can determine there own financial plan without going directly to a financial advisor. Two example's of software tools which are available include a retirement planning tool provided by mPower Advisors LLC, San Francisco, Calif. (website www.mpower.com) and a retirement planning tool provided by Financial Engines, Palo Alto, Calif. (website www.financialengines.com). Financial Engines is shown as an assignee on a number of patents related to retirement planning tools including U.S. Pat. Nos. 6,292,787 (“Enhancing utility and diversifying model risk in a portfolio optimization framework”); 6,125,355 (“Pricing module for financial advisory system”); 6,021,397 (“Financial advisory system”); 6,012,044 (“User interface for a financial advisory system”); 5,918,217 (“User interface for a financial advisory system”), which are incorporated herein by reference.
Another system has been proposed where an individual can receive financial investment advice such that, they are directed to investments in specific trusts, or investment vehicles, which are managed pursuant to certain asset allocation models, as discussed in U.S. Pat. No. 6,154,732 “System for providing investment advice and management of pension assets” which is incorporated herein by reference.
In general operation the prior retirement planning tools appear to require that an individual seek out advice. This means, for example, that an individual most go to either Mpower or Financial Engines website, or other website that provides access to a financial planning tool, and input information into the financial planning tool. This information could include an individuals age, current income, financial assets held in a retirement account, age at which an individual would like to retire etc. Based on this information, the financial planning tool can then provide an estimate showing the likely amount of money that one would have upon retirement. Further, the financial planning tool can also make recommendations as to changes in investments, and future financial planning steps to improve the performance of the financial account to improve the probability that an individual will have sufficient assets at the time of retirement.
One disadvantage with the present system is that the individual must take affirmative steps to get financial planning advice. Specifically, an individual must make time available to seek out financial planning advice. This means an individual must locate financial planning tools or resources and then use the financial planning tool or resource to get financial planning advice. Frequently, individuals do not make the time to seek out financial planning advice.
One disadvantage with the present account statements is that they typically report historical information, and they do not provide advice as to future financial planning strategy. Basically, these account statements provide a snapshot of where the account stands at the time of the account statement, and some information regarding the past condition of the account.